What To Expect From Intel In 2019?

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Intel (NASDAQ:INTC) saw low double-digit revenue growth, while its adjusted earnings per share grew in the low thirties percent in 2018. This can be attributed to strong growth in data-centric business, and a revival in PC-centric business, which otherwise saw slower growth over the past few years. Looking forward, the company expects slow growth in 2019, due to NAND pricing headwinds, and weakness in China demand. We have created an interactive dashboard ~ How Did Intel Fare In 2018, And What Can We Expect In 2019? You can modify our assumptions to see the impact on Intel’s earnings and price estimate. In addition, here is more Information Technology data.

Expect Low Single-Digit Growth In Revenues

Intel’s revenue growth in 2018 was led by both data-centric, as well as PC-centric businesses. Data-centric business primarily includes the servers designed for the enterprise, cloud, communications infrastructure, and technical computing segments, while PC-centric business is focused on processors and platform products designed for use in notebooks, desktops, and tablets, among others. The company’s data center revenues have grown at an average rate of 14% over the last 5 years. The segment revenues were up 21% in 2018, primarily led by Xeon products. Intel controlled around 99% of the server markets till last year. However, it has lost some of its share to AMD’s EPYC processors since then. In the long run, the data center group will likely benefit from the growth in cloud computing, which will result in greater sales of bigger, faster, and higher-end servers at the expense of cheaper ones. However, in the near term, there are a few headwinds, which will likely result in slower growth in 2019.

Firstly, prices for NAND memory have seen significant declines over the last year, as major vendors largely completed the transition from planar NAND to 3D NAND, boosting supply. Moreover, prices for DRAM have been trending lower, and they are expected to correct further. Secondly, the foreign tariffs imposed primarily on China have resulted in weaker demand, amid an overall slower growth in the economy. China’s growth is projected to decelerate from an estimated 6.6% in 2018 to 6.2% in 2019. This will have an impact on the overall sales of data-centric as well as PC-centric business of Intel. PC-centric business saw high single-digit revenue growth in 2018, led by market share gains in modem. The PC TAM (total available market) is expected to remain flat in 2019, and as such, Intel’s PC-centric revenues will unlikely see any significant growth.  The company has guided for a slight decline in its gross margins, amid ramp up of its 10nm chips. This will likely result in a modest decline in EBITDA. We forecast the adjusted earnings to be $4.65 per share in 2019, reflecting a low single-digit growth, primarily reflecting a slight uptick in revenues, and lower share count. Our price estimate of $61 for Intel is based on a 13x forward price to earnings multiple.

 

 

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